Amazon projects fourth quarter sales below estimates, stoking demand concerns

Amazon.com AMZN-Q projected fourth-quarter revenue largely below Wall Street estimates on Thursday, raising concerns over muted retail demand over the crucial holiday season as higher household costs amid rising inflation pressure consumer spending.

The company expects revenue of US$240.0-billion and US$247.0-billion in the fourth quarter, compared with analysts’ average estimate of US$244.51-billion, according to data compiled by LSEG.

Revenue at Amazon Web Services rose 39 per cent to US$46-billion in the third quarter ended September, compared with analysts’ estimate for a 38.2 per cent increase to US$45.61-billion, according to data compiled by LSEG. AWS revenue recorded a 37 per cent jump in the second quarter.

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The downbeat fourth-quarter outlook signals U.S. retailers could face pain in the holiday season, as consumers tighten shopping budgets amid higher gas prices and the rising cost of living.

Still, recent industry forecasts predict holiday sales will accelerate from last year. The National Retail Federation earlier this month predicted a 4.2 per cent jump in total U.S. holiday season sales.

While retail sales account for the majority of Amazon’s revenue, investor focus has shifted sharply towards its cloud computing business, Amazon Web Services in recent years, as the tech giant spends heavily to build out data centres and compete in the global AI race.

At its eCommerce business, Amazon has been rolling out faster delivery services globally and expanding to more rural areas in the U.S. to draw more shoppers.